A Risk Management Approach for the Pre-Series Logistics in Production Ramp-Up

Filla, Patrick; Klingebiel, Katja Conference Paper A Risk Management Approach for the Pre-Series Logistics in Production Ramp-Up Provided in Cooperation with: Hamburg University of Technology (TUHH), Institute of Business Logistics and General Management Suggested Citation: Filla, Patrick; Klingebiel, Katja (2014) : A Risk Management Approach for the PreSeries Logistics in Production Ramp-Up, In: Kersten, Wolfgang Blecker, Thorsten Ringle, Christian M. (Ed.): Next Generation Supply Chains: Trends and Opportunities. Proceedings of the Hamburg International Conference of Logistics (HICL), Vol. 18, ISBN 978-3-7375-0339-6, epubli GmbH, Berlin, pp. 407-422 This Version is available at: https://hdl.handle.net/10419/209217 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by-sa/4.0/  407 A Risk Management Approach for the Pre-Series Logistics in Production Ramp-Up Patrick Filla and Katja Klingebiel Abstract Due to continuing derivatisation and increasing customer requirements, automotive development projects constantly become more complex. With a shortening time-to-market, the critical ramp-up phase of a new or updated automobile is susceptible to a variety of disruptions. As the project duration is naturally restricted, a high number of unscheduled ad-hoc resources are regularly installed to achieve the previously set qualitative targets within the given time limits. For early risk mitigation, current approaches in research and industry focus on the measurement of either technical product degrees or process maturity degrees in the development process. Nevertheless, it is clearly understood, that pre-series logistics bridge both viewpoints and thus still hold significant potential to reduce project risks. Consequentially, this paper presents a methodology that assesses the risk of process-wise and quality-wise delays. After discussing the specific risk profiles within logistics processes in the automotive ramp-up phase, the application of purpose-designed product maturity degree indicators and structured knowledge from historical projects is illustrated. The developed approach enables to identify critical processes in the production readiness process. The paper concludes with a summary and an outlook on further research. Keywords: ramp-up, pre-series logistics, risk management, production development Patrick Filla and Katja Klingebiel 408 1. Introduction Rising customer demands and increasing market saturation necessitate complex business strategies to ensure the competitiveness of manufacturers in the automotive industry (Nyhuis, Klemke and Wagner, 2010, p. 3). Continuous derivatisation responds to the market situation by developing new customers and satisfying existing ones (Fitzek, 2006, p. 4). Short leading positions in a single product segment have economic potential for amortizing the new product (Bischoff, 2007, p. 12). Integrated product life cycles are getting shorter by coupling the development processes (Hertrampf, Nickel and Stirzel, 2008, p. 237). Due to the highly technical and organizational interdependences, new and updated car projects further increase in complexity with derivatisation and shortening strategies (Franzkoch and Gottschalk, 2008, p. 55). The series ramp-up phase (in the following abbreviated to 'ramp-up'), as the last step before start of production (SOP), critically presents the challenge to transfer the product from its project environment to series production. The complexity drives a high amount of uncertainty in development projects and causes a high rate of process-wise failures and disruptions. Approximately 80% of all failures appear in the ramp-up phase, though 75% of all failures originated from the previous development and planning phase (Wildemann, 2002, pp. 4– 5). Research and industry have developed methodologies and approaches to reduce these disruptions. Despite the known advantages of risk management during the ramp-up phase, there are few logistic implementations for this stage (Kuhn, Wiendahl, Eversheim and Schuh, 2002, p. 3). Section 2 organizes pre-series logistics into the product development process and presents the control of the ramp-up phase. Additionally, the risk profile of pre-series logistics is discussed. Section 3 uses the critical path method to present an approach to identify critical processes in the production readiness process by rating the indicators. Section 4 then verifies this method. The paper concludes with a summary and an outlook on further research. A Risk Management Approach for the Pre-Series Logistics 409 2. Pre-series logistics in ramp-up processes Despite the increased attention to the ramp-up phase in the last years, there is no standardized definition. Moreover the definition and description of the preseries logistics tasks are different (Bischoff, 2007, p. 4) (Knüppel, Tschöpe and Nyhuis, 2012, p. 428) (Kuhn, Wiendahl, Eversheim and Schuh, 2002, p. 12). The following section discusses the state of the art and presents the risk profile of the pre-series logistics. 2.1 Ramp-up management The ramp-up phase is characterized as the period between product development and series production (Fjällström, Säfsten, Harlin and Stahre, 2009, p. 179) or as the final stage in the development process (Ulrich, Eppinger, 2011, p. 12). To distinguish the innovative non-product related research and the product related development, the early phase is often called 'series development'. The start of the pre-series is triggered by varying criteria, highlighted in the literature. One such trigger is the switch from prototype production to pre-series automobiles production (Urban and Seiter, 2004, p. 58). Pre-series automobiles are built under conditions similar to series production, using mass production components and tools to prove the series readiness (Fitzek, 2006, p. 2). The definition for the end of ramp-up differs in two points of view: Some sources attribute the end of the ramp-up phase to the achievement of full capacity (Terwiesch and Bohn, 2001, p. 1) (Zäh and Möller, 2004, p. 13) while others attribute it to the production of the first series automoblie (SOP or also called as Job No. 1) (Doltsinis, Ratchev and Lohse, 2013, p. 85) (Fitzek, 2006, p. 55). The pre-series phase ends up in theory with the SOP, as the firm now produces automobiles acceptable for customers. In practice, many departments support the start of series production to ensure product and process quality until full production capacity is achieved. Pragmatically, expansion is appropriate. To define the phase and tasks more precisely, the sub-phases of ramp-up are Patrick Filla and Katja Klingebiel 410 categorized by the 'production ramp-up', which starts with the SOP and ends up with the achievement of full capacity production (Schuh, Stölzle and Straube, 2008, p. 2). The ramp-up phase until SOP is divided into the pre-series and zero series, a function of the targeted process and product quality (Fitzek, 2006, p. 2). In practice, the division of the pre-series into two phases allows a step-wise transition from project to series processes. The pre-series I aims to produce automobiles under conditions similar to series production to prove the reproducibility, a method known as the 'production try-out'. A special assembly line for the pre-series or the future series assembly line produces the pre-series products using mould assembled components for mass production (Pfohl and Gareis, 2000, p. 1198). Pre-series phase II ensures the process and product quality is a an customer acceptable product level. The zero series is the last step before SOP, and serves as a 'buffer' that hands over responsibility to the series facilities (Fitzek, 2006, p. 55). Figure 1 visualizes the discussed product development process and classifies the logistics tasks, which are described in the following section.  Fig. 1: The series ramp-up process 2.2 Pre-Series Logistics The logistics activities before SOP are organized into operative and planning tasks. Logistics planning ensures that the production time and quality of the assembly lines are acceptable for series production (Doch, Rösch and Mayer, 2008, p. 144). Using existing material flows of other series productions, pre- A Risk Management Approach for the Pre-Series Logistics 411 series logistics tests the production time and quality prior to SOP. Permanent changing components up to SOP require special logistics processes and cause a distinction between pre-series logistics processes and series logistics processes (Doch, Rösch and Mayer, 2008, p. 146). Romberg and Hass define the pre-series logistics as an "already series process close department with the tasks to ensure the technical quality of components from external suppliers, to coordinate the material flow for supply of pre-series production and to coordinate the information flow in the pre-series phase itself" (Romberg and Haas, 2005, p. 16). The pre-series logistics is based on tasks of the series logistics: just-in-sequence coordination, warehouse management, program planning and production scheduling (Schulte, 2008, p. 371). The permanently changing bill of material requires a program readiness prior to the SOP that guarantees the availability of the ordered component construction version until the pre-series automobile production starts. Moreover, it implements a change management process that coordinates the information-flow for the entire change process across involved departments (Schneider, 2008, p. 166). 2.3 State of the art in risk management of pre-series logistics Pre-series logistics is responsible for special functions during the ramp-up. It connects and transfers the technical product from the project development environment to the process-oriented series production (Schneider, 2008, p. 166). There are limited references in literature that discuss risk management for the automotive ramp-up phase. Present research is dominated by financially driven performance measurement systems in form of controlling tools (Nau, Roderburg, Klocke and Park, 2012, p. 233). Within highly complex ramp-up projects, costs often cannot be explicitly defined for each process. Thus, the applicability of financial approaches is limited, so non-financial solutions have typically been used. Current approaches provide methodologies for analysis and control for the ramp-up management that focus on either the product or the process, but acknowledge the importance of the interface. Weinzierl defines Patrick Filla and Katja Klingebiel 412 key performance indicators for components (e.g. technical quality) and weighs them for each ramp-up phase. He offers a model of aggregation that derives the overall product maturity (Weinzierl, 2006, p. 59). Hegner solves the problem of information, as the definition of components and processes changes often in the early phases, by concentrating on key performance indicators for each phase in an automotive ramp-up process. Random trend analysis is used to forecast the development situation, such as looking at the key performance indicators, and formulates the ramp-up curve (Hegner, 2010, p. 3). Different key performance indicator based approaches support stable processes by identifying disruptions and enhancing process chains. Nau et al. present a risk assessment method for hybrid manufacturing technologies based on simulation and the Quality Function Method (Nau, Roderburg, Klocke and Park, 2012, p. 233). Risse uses historical information to define a planning approach for different structure ramp-up processes while considering the prospect of optimization (Risse, 2003, p. 222). Gentner provides key performance indicators for development projects which measure efficiency by evaluating process inputs and outputs (Gentner, 1994, pp. 14–15). Czaja focuses on preseries supply chain indicators. His empirical survey analyzes process quality between the manufacturer and supplier (Czaja, 2009, p. 345). Schmahls proposes a performance measurement system to identify and reduce technical and process-related disruptions near the assemby line from a production oriented point of view (Schmahls, 2001, p. 151). The gap in understanding the interface between technical project environment and process oriented departments in pre-series logistics is one of the main reasons for disruptions (Filla and Klingebiel, 2014). The ramp-up phase and pre-series logistics are characterized by a high degree of uncertainty (Urban and Seiter, 2004, p. 58) which gets proved by the high degree of disruptions. The business strategies of the manufacturer create a highly complex network of process stakeholder and highly complex technical automobiles with many interdependences between the components and modules (Nagel, 2011, p. 36). The transfer from the technical development to A Risk Management Approach for the Pre-Series Logistics 413 series processes challenges the implementation of stable reproducible processes considering recurring change requests. The complex opacity of interdependencies causes uncertainty, which creates unexpected consequences. Thus, risk methodologies as described in ISO 31000 "Risk management - Principles and guidelines" (IDW, 11.09.2000, p. 3) cannot be used because fluctuating demand depends on the project phase. Moreover, it is not possible to define fixed key performance indicators to show standardized risks (Filla and Klingebiel, 2014). Results of a survey focusing on the risk profile of a pre-series logistics demonstrate the highly variable requirements for a controlling tool (Dietrichs, 2012, pp. 47–48) (Filla and Klingebiel, 2014). The survey stresses pre-series I as the phase with the highest logistical disruption frequency. Usually these disruptions had to be resolved 'very fast' or 'fast', requiring high effort and the use of unscheduled resources to avoid negative downstream effects. The disruptions in the zero series are described as very critical but were rated by experts as unpredictable and therefore not considerable in a risk management methodology. Regarding especially these disruptions a suitable risk management for the pre-series logistics has to consider indicators from the technical development phase and should focus on the pre-series I. During the pre-series II risk management loses its applicability and a performance measurement should thus take precedence. However, this methodology does not yet exist. The following section presents a new approach that uses indicators and the critical path method to mitigate risks in pre-series logistics processes. The indicators should cover process-wise and quality-wise information to narrow the gap between the product development and series production (Pfohl and Gareis, 2000, p. 1190). Existing approaches offer indicators that can be used for the methodology. Example indicators from Hertrampf, Nickel and Stirzel (2008, p. 237), Juzek and Berger (2013, pp. 400– 401) and Wanner (2009, p. 87) are shown in figure 2. Patrick Filla and Katja Klingebiel 414  Fig. 2: Exemplarily risk indicators 3. Risk management approach to identify critical logistics processes in the ramp-up phase The step-wise optimization of the pre-series logistics process chain (see figure 3) is structured into three risk management tasks that follow the generic risk process (Meier, 2011, lead text). The first step in the loop is the preparation of risk management. Risk sources need to be identified. This can be done, for example, by use of historical projects (Nau, Roderburg, Klocke and Park, 2012, p. 232). The results support to deduce risk indicators, which are necessary to identify and analyze risks in the following steps. Example risk indicators can be seen in figure 2. Risk management preparation finishes with an analysis of the specific process chain, which should be optimized. 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